2005 Texas Government Code CHAPTER 1207. REFUNDING BONDS

GOVERNMENT CODE

CHAPTER 1207. REFUNDING BONDS

SUBCHAPTER A. GENERAL PROVISIONS

§ 1207.001. DEFINITIONS. In this chapter:
(1) "Issuer" means this state or any department,
board, authority, agency, subdivision, municipal corporation,
district, public corporation, body politic, or instrumentality of
this state which has the power to borrow money and issue bonds,
notes, or other evidences of indebtedness. The term includes a
county, municipality, state-supported institution of higher
education, junior college district, regional college district,
school district, hospital district, water district, road district,
navigation district, conservation district, and any other kind or
type of political or governmental entity.
(2) "Paying agent" means the person, including the
bank or trust company, at whose location payment of refunded
obligations is to be made.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.002. AUTHORITY TO ISSUE. An issuer may issue
refunding bonds under this chapter to refund all or any part of the
issuer's outstanding bonds, notes, or other general or special
obligations.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.003. ELECTION. (a) Refunding bonds may be issued
without an election in connection with the issuance of the
refunding bonds or the creation of an encumbrance in connection
with the refunding bonds, except as provided by Subsection (b).
(b) If the constitution of this state requires an election
to permit a procedure, action, or matter pertaining to refunding
bonds, an election to authorize the procedure, action, or matter
shall be held substantially in accordance, to the extent
appropriate, with Chapter 1251.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.004. COMBINATION ISSUANCE. Under the terms and
with the security set forth in the proceedings that authorize the
issuance of the refunding bonds, a governmental entity may issue
refunding bonds:
(1) in combination with new bonds;
(2) with provision for the subsequent issuance of
additional parity bonds or subordinate lien bonds; or
(3) both in combination with new bonds and with
provision for the subsequent issuance of additional bonds.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.005. SOURCES AVAILABLE FOR PAYMENT. Except as
provided by Section 1207.0621, a refunding bond may be secured by
and made payable from taxes, revenue, or both, another source, or a
combination of sources to the extent the issuer is otherwise
authorized to secure or pay any type of bond by or from that source
or those sources.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 1420, § 8.003, eff. Sept. 1,
2001.
§ 1207.006. MATURITY. A refunding bond issued under this
chapter must mature not later than 40 years after its date.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.007. DELEGATION OF AUTHORITY. (a) In connection
with the issuance of refunding bonds, the governing body of an
issuer may:
(1) authorize the maximum principal amount of
refunding bonds that may be issued and the maximum rate of interest
to be borne by the bonds;
(2) identify the potential bonds, notes, or other
general or special obligations that may be refunded;
(3) recite the public purpose for which the refunding
bonds are to be issued; and
(4) delegate to any officer or employee of the issuer
the authority to:
(A) select any specific maturities or series of
bonds, notes, or other general or special obligations to be
refunded; and
(B) effect the sale of the refunding bonds.
(b) In exercising the authority delegated by the governing
body of the issuer to the officer or employee, the officer or
employee may establish the terms and details related to the
issuance and sale or exchange of the refunding bonds, including:
(1) the form and designation of the refunding bonds;
(2) the principal amount of the refunding bonds and
the amount of the refunding bonds to mature in each year;
(3) the dates, price, interest rates, interest payment
dates, principal payment dates, and redemption features of the
refunding bonds;
(4) the form of escrow agreement described by Section
1207.062; and
(5) any other details relating to the issuance and
sale or exchange of the refunding bonds as specified by the
governing body of the issuer in the proceedings authorizing the
issuance of the refunding bonds.
(c) A finding or determination made by an officer or
employee acting under the authority delegated to the officer or
employee has the same force and effect as a finding or determination
made by the governing body of the issuer.
Added by Acts 1999, 76th Leg., ch. 1064, § 7, eff. Sept. 1, 1999.
§ 1207.008. LIMITATION. (a) An issuer may not issue
refunding bonds if the aggregate amount of payments to be made under
the refunding bonds exceeds the aggregate amount of payments that
would have been made under the terms of the obligations being
refunded unless:
(1) the governing body of the issuer, in the
proceedings authorizing the issuance of the refunding bonds, finds
that the issuance is in the best interests of the issuer; and
(2) the maximum amount by which the aggregate amount
of payments to be made under the refunding bonds exceeds the
aggregate amount of payments that would have been made under the
terms of the obligations being refunded is specified in the
proceedings.
(b) An issuer is not required to comply with Subsection
(a)(2) if the governing body of the issuer determines and states in
the proceedings authorizing the issuance of the refunding bonds
that the manner in which the refunding is being executed does not
make it practicable to make the determination required by that
subsection.
Added by Acts 1999, 76th Leg., ch. 1064, § 7, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 769, § 4, eff. Sept. 1,
2001.

SUBCHAPTER B. ADVANCE REFUNDING PROCEDURES

§ 1207.021. AUTHORITY TO DEPOSIT WITH COMPTROLLER. (a)
An issuer is entitled to deposit with the comptroller an amount of
money equal to the sum of:
(1) the principal amount of the bonds, notes, or other
obligations to be refunded;
(2) the interest that will accrue on those bonds,
notes, or other obligations computed to the due date or redemption
date; and
(3) any required redemption premium.
(b) At the time a deposit is made under Subsection (a), the
issuer shall deliver to the comptroller a certified copy of the
proceedings that authorize the issuance of the obligations to be
refunded, or a certified excerpt from those proceedings, that
clearly shows:
(1) each amount of interest and the date on which that
amount of interest is due on the obligations to be refunded;
(2) the date the principal is subject to redemption;
and
(3) the name and address of the paying agent.
(c) The comptroller may rely on a certificate by the issuer
as to the amount of the charges made by the paying agent.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.022. LIMITATION. An issuer may issue refunding
bonds to make a deposit under this subchapter or Subchapter C only
in connection with refunding bonds issued to refund obligations
that are:
(1) scheduled to mature not later than the 20th
anniversary of the date of the refunding bonds; or
(2) subject to redemption before maturity not later
than the 20th anniversary of the date of the refunding bonds.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1064, § 8, eff. Sept. 1,
1999.
§ 1207.023. AMOUNT OF PRINCIPAL. Refunding bonds for
which a deposit is made under this subchapter or Subchapter C may be
issued in an additional amount sufficient to:
(1) pay the cost and expense of issuing the bonds; or
(2) finance a debt service reserve, contingency, or
other similar fund the issuer considers necessary or advisable.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.024. METHODS AND TERMS OF SALE. (a) Refunding
bonds issued to make a deposit under this subchapter or Subchapter C
shall be sold for cash in a principal amount necessary to provide
all or part of the money required to:
(1) pay the principal of the obligations to be
refunded and the interest to accrue on those obligations to their
maturity; or
(2) redeem the obligations to be refunded, before
maturity, on the date or dates the obligations are subject to
redemption, including the principal, interest to accrue on the
obligations to their redemption date or dates, and any required
redemption premium.
(b) The refunding bonds:
(1) shall be sold under the terms and procedures for
the sale as determined by the governing body of the issuer; and
(2) may be sold at public or private sale.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.025. REGISTRATION BEFORE DEPOSIT; REGISTRATION
WITHOUT CANCELLATION OF OBLIGATIONS TO BE REFUNDED. (a) The
comptroller may register refunding bonds as provided by Chapter
1202 before a deposit required by this subchapter or Subchapter C is
made.
(b) If the issuer has complied with each applicable
requirement of this chapter, the comptroller shall register
refunding bonds issued to make a deposit under this subchapter
without the surrender, exchange, or cancellation of the obligations
to be refunded.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1064, § 9, eff. Sept. 1,
1999.
§ 1207.026. USE OF SALE PROCEEDS TO MAKE DEPOSIT; RIGHTS
NOT DEPENDENT ON CANCELLATION OF OBLIGATIONS TO BE REFUNDED. (a)
An issuer may sell and deliver refunding bonds that have been
registered with the comptroller so as to permit the issuer, in a
timely manner determined by the issuer, to use proceeds from the
sale to make all or any part of a deposit under this chapter.
(b) An issuer that has complied with this chapter may issue,
register, sell, or deliver a refunding bond in lieu of the
obligation to be refunded regardless of whether:
(1) the holder of the obligation to be refunded has
surrendered or presented the obligation for payment and
cancellation; or
(2) the obligation to be refunded has been canceled.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.027. COMPTROLLER TO ACCEPT AND KEEP SAFE
DEPOSITS. (a) The comptroller shall:
(1) accept each deposit, payment, or instrument
received under this subchapter; and
(2) safely keep and use the money only for a purpose
specified in this subchapter.
(b) Money deposited with the comptroller under this
subchapter may not be:
(1) used by or for the benefit of this state or for the
benefit of a creditor of this state, except as provided by Section
1207.032; or
(2) commingled with other money.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.028. COMPTROLLER TO SEND AND RECORD DEPOSIT OR
PAYMENT. (a) After receipt of a deposit or payment under this
subchapter, the comptroller shall immediately and by the most
expeditious means send to the paying agent for the obligation being
refunded an amount equal to the deposit or payment less the amount
of any fee charged under Section 1207.032.
(b) The comptroller shall notify the paying agent to send to
the comptroller the obligation being refunded.
(c) After the comptroller has made a record of its payment
and cancellation, the comptroller shall send the obligation being
refunded and any interest coupon to the issuer.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.029. SELECTION OF PAYING AGENT. If there is more
than one paying agent for an obligation being refunded, the
comptroller shall send the money directly to:
(1) the paying agent located in this state, if only one
paying agent is located in this state;
(2) the paying agent located in this state having the
largest capital and surplus, if more than one paying agent is
located in this state; or
(3) the paying agent having the largest capital and
surplus, if no paying agent is located in this state and more than
one paying agent is located in another state.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.030. ESTABLISHMENT AND USE OF TRUST FUND. (a) The
paying agent shall deposit the money received from the comptroller,
except that amount representing the charges of the paying agent, in
an interest and sinking fund to be established and maintained as a
trust fund for the payment of the obligation being refunded.
(b) The paying agent shall, from the interest and sinking
fund, pay or redeem the obligations to be refunded when properly
presented for payment or redemption.
(c) If there is more than one paying agent, the agent to whom
the comptroller sent the money under Section 1207.029 shall make
appropriate financial arrangements to ensure that the necessary
money will be available to any other paying agent to pay or redeem
an obligation to be refunded when presented for payment or
redemption.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.031. WITHDRAWAL OF DEPOSIT. (a) An issuer that
has made the deposit and payments required by this subchapter may
apply to the comptroller to withdraw from the paying agent the
amount of money deposited to the credit of the account of an
obligation that has been refunded, including interest and premium,
if any, by exhibiting the canceled obligation to the comptroller.
The comptroller shall make a proper record of payment and
cancellation of that obligation.
(b) An issuer may withdraw money deposited under this
subchapter only if:
(1) the conditions stated in Subsection (a) are met;
or
(2) the attorney general certifies to the comptroller
that the issuer's payment of the obligation as to which the deposit
was made is barred by limitation and forbidden by law.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.032. COMPTROLLER FEES. The comptroller may charge
a reasonable fee for a service performed under this subchapter.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.033. DISCHARGE. (a) A deposit of money made under
this chapter is considered to be the making of firm banking and
financial arrangements for the discharge and final payment or
redemption of the obligations to be refunded or to be paid or
redeemed wholly or partly without the issuance of refunding bonds
if the deposit is made on or before the payment or redemption date
or dates of the obligations.
(b) An issuer may provide in the proceedings authorizing the
issuance of the refunding bonds that the refunding bonds are
subordinate to the obligations to be refunded. The subordination
may be made only in the manner and to the extent specifically
provided by those proceedings.
(c) After firm banking and financial arrangements for the
discharge and final payment or redemption of the obligations have
been made under Subsection (a), all rights of an issuer to initiate
proceedings to call the obligations for redemption or take any
other action amending the terms of the obligations are
extinguished. The right to call the obligations for redemption is
not extinguished if the issuer:
(1) in the proceedings providing for the firm banking
and financial arrangements, expressly reserves the right to call
the obligations for redemption;
(2) gives notice of the reservation of that right to
the owners of the obligations immediately following the making of
the firm banking and financial arrangements; and
(3) directs that notice of the reservation be included
in any redemption notices that it authorizes.
(d) Subsection (c) applies only to firm banking and
financial arrangements made on or after September 1, 1999, and has
no effect on the validity or legality of any such arrangements made
before that date.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1064, § 10, eff. Sept. 1,
1999.
§ 1207.034. RIGHT TO DEMAND OR RECEIVE EARLY
PAYMENT. The holder of an obligation to be refunded by refunding
bonds may not demand or receive payment of the obligation to be
refunded before its scheduled maturity date, due date, or
redemption date unless the proceedings authorizing the refunding
bonds specifically provide for the earlier payment.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.035. CONFLICT OR INCONSISTENCY WITH OTHER
LAWS. To the extent of a conflict or inconsistency between this
subchapter and another law, this subchapter controls.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.

SUBCHAPTER C. DIRECT DEPOSIT WITH PAYING AGENT

§ 1207.061. AUTHORITY TO DEPOSIT DIRECTLY. (a) An issuer
may, in lieu of making a deposit with the comptroller under
Subchapter B, deposit an amount of money sufficient to provide for
the payment or redemption of the obligations, including assumed
obligations, to be refunded or to be paid or redeemed in whole or in
part without issuing refunding bonds, directly with:
(1) a paying agent for any of the obligations to be
refunded, paid, or redeemed;
(2) the trustee under a trust indenture, deed of
trust, or similar instrument providing security for the obligations
to be refunded, paid, or redeemed; or
(3) a trust company or commercial bank other than one
described by Subdivision (1) or (2) that:
(A) does not act as a depository for the issuer;
and
(B) is named in the proceedings of the issuer
authorizing execution of an agreement under Section 1207.062.
(b) An issuer may make a deposit under this section from any
source, including the proceeds from the sale of the refunding
bonds.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 769, § 5, eff. Sept. 1,
2001.
§ 1207.062. ESCROW AGREEMENT. (a) An issuer may enter
into an escrow or similar agreement with a person described by
Section 1207.061(a) with respect to the safekeeping, investment,
administration, and disposition of a deposit made under Section
1207.061.
(b) A deposit under Section 1207.061 may be invested only
in:
(1) direct noncallable obligations of the United
States, including obligations that are unconditionally guaranteed
by the United States;
(2) noncallable obligations of an agency or
instrumentality of the United States, including obligations that
are unconditionally guaranteed or insured by the agency or
instrumentality and that, on the date the governing body of the
issuer adopts or approves the proceedings authorizing the issuance
of refunding bonds, are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or
its equivalent; and
(3) noncallable obligations of a state or an agency or
a county, municipality, or other political subdivision of a state
that have been refunded and that, on the date the governing body of
the issuer adopts or approves the proceedings authorizing the
issuance of refunding bonds, are rated as to investment quality by a
nationally recognized investment rating firm not less than AAA or
its equivalent.
(c) A deposit under Section 1207.061 may be invested only in
obligations that mature and bear interest payable at times and in
amounts sufficient to provide for the scheduled payment or
redemption of the obligation to be refunded. The obligations may be
in book-entry form.
(d) An issuer shall enter into an agreement under Subsection
(a) if an obligation to be refunded is scheduled to be paid or
redeemed on a date later than the next scheduled interest payment
date on the obligation.
(e) Notwithstanding Subsection (b), a deposit under an
escrow agreement entered into under Subsection (a) before September
1, 1999, may not be invested in an investment described by
Subsection (b)(2) or (3).
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1064, § 11, eff. Sept. 1,
1999; Acts 2001, 77th Leg., ch. 769, § 6, eff. Sept. 1, 2001.
§ 1207.0621. SOURCES AVAILABLE FOR PAYMENT. An issuer
may pledge to the payment of a refunding bond issued to make a
deposit under this subchapter:
(1) any surplus income to be earned from the
investment of a deposit made under this subchapter;
(2) any other available revenue, income, or resource;
or
(3) both surplus income described by Subdivision (1)
and any other available revenue, income, or resource.
Added by Acts 2001, 77th Leg., ch. 1420, § 8.003, eff. Sept. 1,
2001.
§ 1207.063. DUTY TO COMPLY. A person described by
Section 1201.061(a) that enters into an agreement under Section
1207.062 shall comply with each term of that agreement and, from the
deposited money and in the manner and to the extent provided by the
agreement, make available to any other paying agent or trustee for
an obligation of the same or a different series of obligations to be
refunded, paid, or redeemed, the amounts required by the terms of
the obligation to pay or redeem the principal of and interest on the
obligation when due.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 2001, 77th Leg., ch. 769, § 7, eff. Sept. 1,
2001.
§ 1207.064. INCONTESTABILITY OF CERTAIN ESCROW AGREEMENTS
AND CONTRACTS. After the registration of a refunding bond and the
sale and delivery of the bond to the purchaser, the proceedings that
authorize the refunding bond, any escrow agreement relating to the
refunding bond, and any contract providing security or payments
with respect to the refunding bond are:
(1) incontestable in any court or other forum for any
reason; and
(2) valid and binding obligations in accordance with
their terms for any purpose.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.

SUBCHAPTER D. EXCHANGE REFUNDING PROCEDURES

§ 1207.081. ISSUANCE IN EXCHANGE FOR OBLIGATION TO BE
REFUNDED; LIMITATION. (a) Refunding bonds may be issued to be
exchanged under this subchapter for, and on the surrender and
cancellation of, the obligations to be refunded.
(b) The comptroller shall register a refunding bond and
deliver it to the holder of the obligation to be refunded, in
accordance with the proceedings authorizing the refunding bond.
The exchange may be made in one delivery or in installment
deliveries.
(c) Repealed by Acts 1999, 76th Leg., ch. 1064, § 47(1),
eff. Sept. 1, 1999.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
Amended by Acts 1999, 76th Leg., ch. 1064, § 47(1), eff. Sept. 1,
1999.
§ 1207.082. LIMITATION ON AUTHORITY TO PARTIALLY
REFUND. An issuer may issue refunding bonds to be exchanged under
this subchapter to refund part of an outstanding issue of bonds,
notes, or other obligations only if the issuer demonstrates to the
attorney general at the time of the refunding that, based on then
current conditions, the issuer will have adequate resources
available at the times required to provide for the payment of the
unrefunded part of the outstanding issue when due.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.083. OTHER POWERS OF ISSUER. To the extent
necessary or convenient in carrying out a power under this
subchapter, an issuer may use the provisions of any other law that
does not conflict with this subchapter.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.
§ 1207.084. CONFLICT OR INCONSISTENCY WITH OTHER
LAWS. When bonds are being issued to be exchanged under this
subchapter, to the extent of a conflict or inconsistency between
this subchapter and another law, this subchapter controls.
Added by Acts 1999, 76th Leg., ch. 227, § 1, eff. Sept. 1, 1999.

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